Before you read this, please read: "The 5 Most Important Things To Have In Your Business Plan (that investors want to read about)". It can be found on this site as well.

Read it? Good.

Now, how do you get someone to take time to read your business plan? I mean really read it. Tip: build it around those 5 important things.

In the following, you will learn what to ask your self about your business to help you create the type of business plan that investors and funding sources will be interested in reading. Give some thought to what follows and your answers will draw from you what you need in order to incorporate those 5 most important things into your plan!

Step One - Focus (number 1 on the list of 5 most important aspects of your business; use this in your executive summary)

Everything starts with a purpose. Can you state your company's purpose with a single declarative sentence?

You can elaborate on that in a more lengthy business description but you need to be able to create a standalone sentence that captures the essence of your business. That is your "tag line".

What is your revenue model, i.e. how do you make money?

Explain to the reader how you make money. Walk them simply through who your customer is and how you put money in your pocket.

If you cannot do that, work at it until you can create a simple description or presentation of how you will make money. A complex revenue model with a lot of moving parts is more difficult (and costly) to execute and is susceptible to breaking down and investors know this.

Step Two - Viability (number 2, 3 & 4 on the list of 5 most important aspects of your business; use this in your business plan to shape your discussion on market opportunity and potential)

Your market is your reason for existing. What market does your company serve?

What problem does it address and solution does it provide? If your company did not exist, how would the customer solve their problem? What is your value proposition to the customer? Describe how your solution makes your customers life better.

Is there something special about the timing for your business and its opportunity in your market? Are there special circumstances that create your opportunity?

Is the window of opportunity a narrow one or is it long-term and broad based?

Can you define your specific customer's profile?

What is your target? What is the size of your market?

How strong and/or large is your customer pipeline? Is it long and narrow (which indicates your customers are mostly one-shots but there are a lot of them)? Is it short but deep (a niche but fat with repeat buyers)? Or is it both? If it is then get your giddy up on ... that is the best pipeline that any business (or investor) could ask for or dream of.

Do you know who your competition is? Have you done a "head-to-head" comparison to see how you match up to them? Is your company more agile and responsive than the competition? What is your competitive advantage? Is your product or service less costly, better quality or a more timely solution for the customer?

Step Three - Team (number 5; use this in your business plan to give a compelling & reassuring picture of you management team)

What is the experience and capability of your executive team?

What can you say about them, that shows investors they can execute the business plan? Who are your advisors? Do you have resources outside the company, with business experience to draw upon to help you?

The two areas of expectation that you need to be realistic about and manage:

1- The type and amount of capital that you need 2 - Your financial projections

Lets talk about the first one.

Large amounts of capital thrown at a market means you are trying brute force to establish your market viability and not letting market appeal establish it for you.

Rarely do investors give large wads of cash to companies in one lump; it usually comes in tranches as the company achieves certain milestones. They will want to see what you can do with smaller amounts of capital so don't tell them that you need $5,000,000 in one lump sum to execute your business plan. Break it down into measurable milestone events to drive your effort towards so that they can see what your detailed use of proceeds will be and attach some sort of performance measurement to each milestone.

Keep in mind that a true market opportunity with customers that need (and want) your product/service can often be met and developed with less capital than you may think so be practical and realistic in defining how much capital you need.

Some of what investors and funding sources will want to know:

How well can you control your expenses and use (or plan to use) the capital wisely? Have you defined, in detail, how much capital you need, when and for what specific purpose (usually called a Use of Proceeds statement that you would include in your business plan)?

The second one.

This is the most abused part of most business plans I see (if it is a business plan that I did not write) and many times is the section that most often kills interest. You can do a great job with everything we've mentioned previously but if you do this part wrong ... you lose ground and traction with the reader.

If your business plan has financial projections that show a growth pattern like a hockey stick on its back with the head (or blade) to the right and pointing up ... then you are going to have a problem with credibility.

Unless you are an experienced entrepreneur, with a proven record of that type of success in other yet similar businesses - you will not have the benefit of the doubt. Let me say this differently: "Investors, funding sources and professionals you approach to help you will not believe your projections if you show in your plan that you are going to go from zero to - PLUG IN ANY NUMBER HERE THAT IN THE CONTEXT OF THEIR BUSINESS OR CURRENT SITUATION, SEEMS UNREALISTIC - in two or three years."

I see them all the time. Business plans where the business owner or entrepreneur shows that they are going from zero (or some small amount if an established business) and in two or three years they will reach $224,000,000 in revenue. Don't think that you are impressing anyone with large numbers. It's not going to happen. Any numbers you use; you better be able to back up or at least give a rational explanation or defense of them. And you cannot just say: "The market is $10,000,000,000 (ten billion) annually and our projections show only 1% of that market." Don't pick up your pencil or turn on your calculator 1% = $100,000,000 (one hundred million).

Now you may have a great product or service and ultimately you may get to that point of market penetration. But don't say that you are going to get there from zero in five years unless you have a way to back that up (purchase orders, contracts or letters of commitment from customers). If you don't have that kind of validation of your projections ... then you probably need to scale things back to a practical level where the person reading your plan's "gut check" is more an acknowledgement of "that seems doable" than "push back" that what you project is unrealistic.

*

Now, even the best-written business plans do not always get funding or investor interest. After all bottom line it is about the business, the people involved and their capability that will primarily affect how well the venture is received by investors and funding sources. And you have to have perseverance to "strike" the right timing with investors and funding sources.

But if you are going after capital, then doesn't it make sense to make this (your business plan, the most important document you use with funding sources & investors) the best that it can be? I think so.

I hope the above (and other articles you find on this site) are of help to you with your business or business venture.

Dennis Lowery is an entrepreneur and business consultant with 26 years experience. He has funded, started, bought and sold a number of businesses and helped clients do the same. He is President of Adducent, Inc. and a Founding Partner of Wilshire Capital Funding Inc. For more information please visit http://www.adducent.tv/, Adducent.TV ~ Information & Services to help you start, fund or buy a business.

I am one of those who never wrote a business plan because our business needed no "borrowed" start up money. We used a proven method, studied our competition, found our niche (advertising for the transportation industry), made our sales calls, contacted mutual friends in the industry, and business came.We sold $200,000 the first year; 2001, $1,000,000 the second; and at over $4,000,000 by the end of 2006. We branched out into new markets for us and our customers to keep them and find new ones; printing, promotions, monogrammed apparel, one stop shopping we called it. We added staff, added equipment, and trained. Then, the gas prices and the economy killed the transporation industry.Our diversification is working, but too slowly to keep up with the losses in transportation. An example: one of our customers 2 years ago was doing $16,000 in advertising per month, and they paid monthly. Their budget is now less than $8,000 per month.How do I convince a bank to loan me the capital for a year to keep up the transportation side and wait out the recession? Do I go to the bank? I am really at a loss and have responsibilities to the people who work for me.I have cut payroll, I have cut bonuses, I have cut expenses, my family has personally put in additional hours to make deadlines, I have focused on new customers and worked to keep the old ones.What can I do now to get cash flow before it is too late?I have done a marketing plan with former jobs, but not my own. It was recommended by the SBA? Does history make a better marketing plan? Is this what I should focus on right now? How is the economy slide, recession, and my lower, slower revenue going to affect my bank's decision to "bail me out"? I know transportation will rebound, but how do I keep alive until then? I have to do something soon.What would you advise?

You're welcome. Business plans are not just for start-ups. They are also necessary when established businesses hit a plateau or are staging/preparing for growth or when they are entering difficult economic times ... those are times when it is important to have a business plan in place to support meetings with their lenders (or prospective lenders) and investors to raise capital to help fuel growth or get them through the tough times. And sometimes it is important to show your plan to creditors as part of a restructuring of debt to get temporary relief from a cash crunch. All of the things you have done would go into that plan to show what remedies you have taken to cut expenses as much as possible, to retain customers and to create new ones. If the plan is put together well, and the picture it shows is one where you prove the viability or sustainability of your business going forward, that may be what swings getting some capital lined up to help you until things get turned around.

So, if you can do it, I recommend getting your plan (including realistic financial projections) together and using that as a means to show people you can get through the crunch. Even during tough times it may be possible to bring in an angel investor (one that understands your industry and can see your business is sustainable and should recover). So that may be something to consider as well. An equity investor as opposed to a loan (debt) would mean you don't have additonal demands placed on cash flow.

You are looking for working capital to fund what is essentially a cash flow problem. The investor will have to roll over the working capital loan till your business recovers. Even though you have a good track record,you will be lucky to get it.Diversification and innovate cost cutting (staff working for home etc.) , doing a detailed cost study of running costs in the company. These are the area of focus.I don't know if you have done it, but ask your staff to brainstorm and come up with possible lines of action. Someone may come up with a bright and workable idea.

In today's conditions, first time entrepreneurs have no chance whatsover with organized investors, i.e., venture capitalists and angel investors. Business plans are a means to clarify your thinking and to improve communications. Thats it, no one will finance based on a business plan alone.

Once you recognize this reality, you are more likely to come up with good ideas. What I am doing is to go direct to potential customers and offer them specific benefits with the technology we have. In return for seed capital, we are working on offering them exclusive distribution rights. I will report back when it actually works out.

Before you read this, please read: "The 5 Most Important Things To Have In Your Business Plan (that investors want to read about)". It can be found on this site as well.

Read it? Good.

Now, how do you get someone to take time to read your business plan? I mean really read it. Tip: build it around those 5 important things.

In the following, you will learn what to ask your self about your business to help you create the type of business plan that investors and funding sources will be interested in reading. Give some thought to what follows and your answers will draw from you what you need in order to incorporate those 5 most important things into your plan!

Step One - Focus (number 1 on the list of 5 most important aspects of your business; use this in your executive summary)

Everything starts with a purpose. Can you state your company's purpose with a single declarative sentence?

You can elaborate on that in a more lengthy business description but you need to be able to create a standalone sentence that captures the essence of your business. That is your "tag line".

What is your revenue model, i.e. how do you make money?

Explain to the reader how you make money. Walk them simply through who your customer is and how you put money in your pocket.

If you cannot do that, work at it until you can create a simple description or presentation of how you will make money. A complex revenue model with a lot of moving parts is more difficult (and costly) to execute and is susceptible to breaking down and investors know this.

Step Two - Viability (number 2, 3 & 4 on the list of 5 most important aspects of your business; use this in your business plan to shape your discussion on market opportunity and potential)

Your market is your reason for existing. What market does your company serve?

What problem does it address and solution does it provide? If your company did not exist, how would the customer solve their problem? What is your value proposition to the customer? Describe how your solution makes your customers life better.

Is there something special about the timing for your business and its opportunity in your market? Are there special circumstances that create your opportunity?

Is the window of opportunity a narrow one or is it long-term and broad based?

Can you define your specific customer's profile?

What is your target? What is the size of your market?

How strong and/or large is your customer pipeline? Is it long and narrow (which indicates your customers are mostly one-shots but there are a lot of them)? Is it short but deep (a niche but fat with repeat buyers)? Or is it both? If it is then get your giddy up on ... that is the best pipeline that any business (or investor) could ask for or dream of.

Do you know who your competition is? Have you done a "head-to-head" comparison to see how you match up to them? Is your company more agile and responsive than the competition? What is your competitive advantage? Is your product or service less costly, better quality or a more timely solution for the customer?

Step Three - Team (number 5; use this in your business plan to give a compelling & reassuring picture of you management team)

What is the experience and capability of your executive team?

What can you say about them, that shows investors they can execute the business plan? Who are your advisors? Do you have resources outside the company, with business experience to draw upon to help you?

The two areas of expectation that you need to be realistic about and manage:

1- The type and amount of capital that you need 2 - Your financial projections

Lets talk about the first one.

Large amounts of capital thrown at a market means you are trying brute force to establish your market viability and not letting market appeal establish it for you.

Rarely do investors give large wads of cash to companies in one lump; it usually comes in tranches as the company achieves certain milestones. They will want to see what you can do with smaller amounts of capital so don't tell them that you need $5,000,000 in one lump sum to execute your business plan. Break it down into measurable milestone events to drive your effort towards so that they can see what your detailed use of proceeds will be and attach some sort of performance measurement to each milestone.

Keep in mind that a true market opportunity with customers that need (and want) your product/service can often be met and developed with less capital than you may think so be practical and realistic in defining how much capital you need.

Some of what investors and funding sources will want to know:

How well can you control your expenses and use (or plan to use) the capital wisely? Have you defined, in detail, how much capital you need, when and for what specific purpose (usually called a Use of Proceeds statement that you would include in your business plan)?

The second one.

This is the most abused part of most business plans I see (if it is a business plan that I did not write) and many times is the section that most often kills interest. You can do a great job with everything we've mentioned previously but if you do this part wrong ... you lose ground and traction with the reader.

If your business plan has financial projections that show a growth pattern like a hockey stick on its back with the head (or blade) to the right and pointing up ... then you are going to have a problem with credibility.

Unless you are an experienced entrepreneur, with a proven record of that type of success in other yet similar businesses - you will not have the benefit of the doubt. Let me say this differently: "Investors, funding sources and professionals you approach to help you will not believe your projections if you show in your plan that you are going to go from zero to - PLUG IN ANY NUMBER HERE THAT IN THE CONTEXT OF THEIR BUSINESS OR CURRENT SITUATION, SEEMS UNREALISTIC - in two or three years."

I see them all the time. Business plans where the business owner or entrepreneur shows that they are going from zero (or some small amount if an established business) and in two or three years they will reach $224,000,000 in revenue. Don't think that you are impressing anyone with large numbers. It's not going to happen. Any numbers you use; you better be able to back up or at least give a rational explanation or defense of them. And you cannot just say: "The market is $10,000,000,000 (ten billion) annually and our projections show only 1% of that market." Don't pick up your pencil or turn on your calculator 1% = $100,000,000 (one hundred million).

Now you may have a great product or service and ultimately you may get to that point of market penetration. But don't say that you are going to get there from zero in five years unless you have a way to back that up (purchase orders, contracts or letters of commitment from customers). If you don't have that kind of validation of your projections ... then you probably need to scale things back to a practical level where the person reading your plan's "gut check" is more an acknowledgement of "that seems doable" than "push back" that what you project is unrealistic.

*

Now, even the best-written business plans do not always get funding or investor interest. After all bottom line it is about the business, the people involved and their capability that will primarily affect how well the venture is received by investors and funding sources. And you have to have perseverance to "strike" the right timing with investors and funding sources.

But if you are going after capital, then doesn't it make sense to make this (your business plan, the most important document you use with funding sources & investors) the best that it can be? I think so.

I hope the above (and other articles you find on this site) are of help to you with your business or business venture.

Dennis Lowery is an entrepreneur and business consultant with 26 years experience. He has funded, started, bought and sold a number of businesses and helped clients do the same. He is President of Adducent, Inc. and a Founding Partner of Wilshire Capital Funding Inc. For more information please visit http://www.adducent.tv/, Adducent.TV ~ Information & Services to help you start, fund or buy a business.

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